Travere Therapeutics, Inc. (TVTX) Q2 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Retrophin, Incorporated Second Quarter 2018 Financial Results and Corporate Update. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time [Operator Instructions]. As a reminder, this conference call maybe recorded. I would now like to turn the conference over to Chris Cline, Vice President of Investor Relations. You may begin.

Great. Thank you, Nicole. Good afternoon, everyone and welcome to Retrophin second quarter financial results and corporate update call. Joining me on the call today are Steve Aselage, Chief Executive Officer; Neil McFarlane, Chief Operating Officer; Laura Clague, Chief Financial Officer; and Dr. Bill Rote, Senior Vice President and Head of Research and Development. Before we begin, I would like to remind everyone that statements made during this call regarding matters that are not historical facts, are forward-looking statements within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, performance and achievements to differ materially from those expressed or implied by the statement. Please see the forward-looking statement disclaimer on the Company's press release issued earlier today, as well as the Risk Factors section in our Forms 10-K and 10-Q filed with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made, July 26, 2018, and Retrophin specifically disclaims any obligation to update such statements to reflect future information, events or circumstances. With that, I'll now turn the call over to Steve. Steve?

Thanks Chris. Good afternoon everyone and thank you for joining us on today's call. Our team had another solid quarter of execution on our strategies to advance our pipeline and grow the base of business. Most notably, execution on our clinical programs during the quarter keeps us on track to achieve three pivotal trials enrolling by the end of 2018 and potentially a fourth in 2019. We reached significant milestones with all of our product candidates. Specifically, we opened pediatric enrollment in the pivotal FORT study with fosmetpantotenate and PKAN. This was an important event that was enabled by successful evaluation of safety from the independent data monitoring committee for the study. As expected, we saw meaningful inflection in enrollment during the quarter and we remain on track to have that available in the second half of 2019. We also made landmark progress with sparsentan in both FSGS and IgA nephropathy during the quarter. The initiation of the duplex study of sparsentan in April kicked off efforts to enroll 190 patients to enable the interim primary assessment that we expect will serve as the basis for subpart H submission. FSGS patients are in desperate need of a better treatment option, and I am pleased that we are on the path to potential providing that. We also made significant progress with sparsentan and IgA nephropathy and continue to be optimistic in the opportunity to improve the standard of care for these patients. We’re very pleased to received regulatory guidance during the quarter that enables us to move directly into a single pivotal trial for IgA nephropathy. Protocol finalization and study activation efforts are underway, and we are moving quickly to enable the initiation of that study in the fourth quarter of this year. Lastly, regarding sparsentan, we got a new patent granted during the quarter covering the use of sparsentan and IgA nephropathy and expanding the dosing coverage in FSGS. The broadening of our intellectual property as a result of this newly issued patent will help us position sparsentan, if approved, as a first-in-class therapy for both FSGS and IgA nephropathy for many years to come. We’re also gaining further optimism for the research collaboration surrounding CNSA-001. During the second quarter, both the single and multiple ascending dose portions of the Phase 1 study of CNSA-001 were completed and showed encouraging preliminary results. These results gave us and our partners a sense of the confidence to move ahead with the Phase 2 proof-of-concept study as planned. We expect the proof-of-concept study to start in the next few weeks, which keeps us on track to see top line data in early 2019. That readout will inform our decision to exercise our option to acquire CNSA. Neil and his team also turned in another quarter of growth from the base business, and I am pleased that we continue to positively impact more patients’ lives with our approved products. We expect our commercial initiatives to gain traction through the balance of 2018 and to reach our guided range of $170 million to $180 million in net product sales for the year. Before I turn the call over to Bill to walk through the pipeline update, I would like to take a brief moment to touch on the announcement of my upcoming retirement that was included in our press release a short while ago. It has truly been an honor to lead Retrophin through a remarkable transition. As you can clearly tell from my earlier comments, the fundamentals of the business have never been stronger. Given the collective progress our organization has made over the past several years, I'm confident that now is the appropriate time to begin transitioning the Company to a new leader that can build upon our success and guide Retrophin for the years ahead. The Board has initiated a search for my successor and will include both internal and external candidates, and I will continue to lead our great team members until that person is identified and we ensure a smooth transition. Until that time, it is business as usual at Retrophin and we will continue to move the Company forward. Let me now turn the call over to Bill for his research and development update.

Thanks Steve. From a research and development perspective, we continue to be focused on execution in the clinic and I'm proud of the progress we've made during the quarter. I'll start with our lead program, fosmetpantotenate, which is currently enrolling a pivotal Phase 3/4 force study for Pantothenate Kinase-Associated Neurodegeneration or PKAN. During the second quarter, we reached the key milestone for the study after the independent data monitoring committee completed its scheduled clinical safety review required to open enrollment for pediatric patients. After reviewing the available safety and tolerability data of adult patients in this study, in May, the DMC recommended that the pivotal trial continue as planned and supported opening of enrollment of the pediatric patients, age six to 17. The DMC's review of the available safety and tolerability data and corresponding support to continue as planned is encouraging for the profile of fosmetpantotenate and strengthens our optimism that the FORT study will ultimately enable us to deliver the first approved treatment for PKAN. With pediatric patients now enrolling in the study, the continued great work of our clinical and medical teams are doing with the sites, we're seeing a steady pace of enrollment. Notably, we expect to complete enrollment in the study around year-end or early 2019, and have top line readout in the second half of 2019. We also continue to make great strides with sparsentan, which is our product candidate with first-in-class potential for both Focal Segmental glomerulosclerosis for FSGS and IgA nephropathy. At the beginning in the second quarter, we initiated the Phase 3 duplex study of sparsentan and FSGS. This is our pivotal study that builds upon the successful Phase 2 DUET study to support registration in both the U.S. and Europe. Since the study started a few months ago, we've been working through additional site initiation and activation activities, and I am pleased with the progress made thus far. Our clinical team's focus will remain on enabling sites to reach the initial enrollment target of approximately 190 patients with FSGS, to evaluate the interim efficacy end point, modified partial remission of proteinuria after 36-weeks of observation. We expect the successful achievement of this proteinuria end point and the interim analysis of DUPLEX will serve as the basis for subpart H accelerated approval of sparsentan in the United States, and conditional marketing authorization consideration in Europe. Importantly, the program remains on track for top line readout of this end point in the second half of 2020. We also made progress in the efforts to initiate our pivotal trial on IgA nephropathy. At the end April, we received regulatory feedback that confirmed our approach of running a single Phase 3 trial to support registration in the U.S. and in Europe. Since then, we've been working to finalize our protocol to align with the regulatory feedback received, and in parallel begin the site initiation activities. Alongside our CRO, our clinical teams are making great progress in settings us up for a strong study start. And we remain on track to initiate the trial in the fourth quarter of this year. As we have stated previously, we envision the trial to be similar in many respects for our ongoing DUPLEX study in FSGS. Specifically, we expect an interim analysis based on proteinuria that will support a submission for conditional approval in the U.S. and Europe. As we stated in our last update, we anticipate giving the full details of the study and timelines for data closer to study initiation. With these two pivotal trials running by the end of the year, we will have positioned sparsentan, if successful in the clinic and subsequently approved, to ultimately become a first-in-class treatment option for both FSGS and IgA nephropathy. Lastly, I'll provide an update on our collaboration for the development of CNSA-001 for phenylketonuria, or PKU. In the second quarter, program completed its Phase 1 dosing study, and a review of the preliminary data has shown predictable PK in normal volunteers and confirms our hypothesis that the bioavailability of CNSA-001 in humans is consistent with the data observed in preclinical studies. Next up for the program is the commencement of the Phase 2 proof-of-concept study, sites have already been initiated and we anticipate our partner will be dosing the first patient in the coming weeks. The proof-of-concept study will be randomized, double crossover, open label, active control study of CNSA-001 in patients with PKU. We will be looking at two doses of CNSA-001 versus the maximum recommended dose of the current standard of care with the expectation that CNSA-001 treatment will produce a clinically meaningful benefit over the current standard of care. We remain optimistic and look forward to the top line readout of the study in early 2019. Overall, we had a great quarter of execution and expect all of our programs on track and advancing toward key upcoming milestones. Let me now turn the call over to Neil for the operational update. Neil?

Thanks, Bill. Our commercial team continued the trend of organic growth across our approved product portfolio, which resulted in $41.3 million in net product sales for the quarter. Thiola continues to grow as expected and we anticipate steady progress for the product throughout the balance of 2018. Notably, our dedicated team's efforts to help physicians identify newly diagnosed and undertreated cystinuria patients remain effective in growing our business. These initiatives combined with the continued advancement of the new formulation of Thiola gives us confidence in the brand and its growth. I’m pleased to report that alongside with our partner, we remain on track for an NDA filing of the new more patient friendly formulation of Thiola in the second half of this year. I'm also pleased to report that we made additional progress by filing a patent application, covering the new formulation during the quarter. We continue to believe the new formulation will give us a great opportunity to improve the patient experience with the product and the patent will help to improve the longevity of the brand if granted. Given the expected improvement in the patient experience, we believe there should be a seamless transition to the new product, and plan for 2019 launch is already underway. Our bioavailability products also grew relative to the same period last year. While the growth seen with this portion of the portfolio was uneven compared to previous quarters, we’ve experienced as previously and is not uncommon in rare diseases with small patient populations. We continue to expect growth will accelerate throughout the balance of 2018 as we saw last year. Importantly, we continue to see new patients initiate both Cholbam therapies and our initiatives to support Cholbam continue to gain traction. We’re seeing increased interest from physicians in utilizing our trail programs for the liver manifestation of the disease in patients with Zellweger spectrum disorders. The trial program allows physicians to initiate Cholbam therapy for patients who've had hepatic involvement in EFT and evaluate the potential beneficial effects. Combining this with our sponsor’s symptom based genetic screening panel and atypical bile acid testing programs gives us confidence we will continue to grow Cholbam for the foreseeable future. Overall, I'm pleased with the continued revenue growth we've had to start the year. We expect our dedicated teams’ efforts with Thiola and Cholbam and the initiatives that are driving will accelerate growth in the second half of 2018. And as Steve mentioned earlier, we continue to expect we will reach our guided range of $170 million to $180 million for the full year. I'll now turn the call over to Laura to walk through the financials. Laura?

Thanks Neil. During the second quarter, net product sales from our commercial portfolio grew to $41.3 million. We reported GAAP net loss of $22.3 million for the second quarter of 2018. After adjusting for non-GAAP expenses of $12.4 million, we reported a non-GAAP net loss of $9.9 million. On a GAAP basis, R&D expenses were $34.5 million for the second quarter of 2018. The increase over the same period in 2017 is largely due to higher expenses to support our pivotal fosmetpantotenate and sparsentan programs, as well as development funding for CNSA-001. On an adjusted basis, R&D expenses were $32.6 million for the second quarter. Relevant non-cash expenses for the second quarter included $1.9 million of stock-based compensation and amortization. Selling, general and administrative expenses were $25.1 million in the second quarter of 2018. The decrease compared to the same period last year is primarily due to lower legal fees. On an adjusted basis non-GAAP SG&A expenses were $16.9 million for the second quarter. Significant non-cash adjustments for the quarter consisted of $8.2 million related to stock-based compensation, and depreciation and amortization. As of June 30, 2018, we had $255.7 million in cash and cash equivalents and marketable securities. Looking to the balance of 2018, we expect operating expenses and cash used to remain relatively steady compared to our second quarter levels with the potential for some slight increases R&D as we continue to advance our key programs in the clinic. Let me now turn the call back over to Steve for his closing comments. Steve?

Thanks, Laura. As I mentioned earlier, the fundamentals of our Company have never been stronger. And due to the dedicated efforts of all of our employees, we've had tremendous success in building an organization that offers diverse opportunities for sustainable value creation. In a remarkably short period of time, we've built a growing commercial business and advanced our pipeline to a position of three pivotal programs running by the end of 2018. All of which have the significant opportunity to offer first-in-class treatment for thousands of patients with rare diseases around the world. We will remain focused on execution and reaching our next phase of growth. This will be led by the upcoming key inflection points that will demonstrate the transformative value of our pipeline and advances towards our vision of becoming a preeminent member of the rare disease community. Let me now turn the call back over to Chris for question.

Thanks, Steve. Nicole, can we go ahead and open up the line for Q&A please?

Thank you [Operator Instructions]. Our first question comes from Do Kim of BMO Capital Markets. Your line is now open.

First question on the CNSA 001. Could you talk a little bit more about the safety findings of the Phase 1 study in healthy volunteers and how it compares to Cholbam?

We’ve looked at the top line data and we don't have a clinical study report. My recollection was that both groups were pretty benign in the adverse event profile, nothing that stood out on either agent.

And for the Phase 2, who will be running it, will it be you or CNSA?

CNSA runs that program, they responsible for the development.

And for Thiola. Could to remind us what the population size is and how far you’ve penetrated into that market? And where the challenges are in getting the incremental patient?

If I can go back to the CNSA question again before Neil talks about Thiola, just want to mention that we have a joint steering committee with senior clinical people from both Retrophin and CNSA. And while CNSA is running the study, it’s been a very collaborative effort between the two companies to make sure that we’re moving in a direction that everyone feels comfortable with. It’s been really a great working relationship to-date. So I didn’t want to interrupt, but I thought that was worth mentioning. I am going to give it to Neil now to answer your question about Thiola?

So we, at this point, believe that there is approximately 5,000 patients with cystinuria out there and where we are today in terms of our penetration of the market, we feel that there is still a large portion of those patients that we’ll be address with our new formulation of Thiola.

Thank you. Our next question comes from the line of Joseph Schwartz of Leerink Partners. Your line is now open.

This is Dig on dialing in for Joe, thanks for taking our questions. So three specifically from me, first one on the PKAN program. Bill, can you remind us what the enrollment breakdown is between the adult and pediatric in the estimated 82 patient FORT study? And broadly speaking, how the enrollment of pediatric patients been? I know it’s only been about a month or so, and you sounded pretty upbeat. Just wanted to get some commentary on the enrollment progress there? And in terms of disease progression, is there much in terms of difference, in progression between the adult and the pediatric patients? And then I’ve got a couple of follow up. Thanks.

In the protocols, the FORT study protocol does not specify a breakdown between adult and pediatric, it’s silent on that division. So right now, as you can imagine, we have predominantly adults, because that's who we’ve been enrolling. With the opening to pediatric patients, we’ve had good enthusiasm and beginning to enroll pediatric subjects in the study. But as you stated, it's just been a month and we’re just getting started. And some of it is just -- a lot of it has been patients scheduling when they want to start and working at around school calendars and stuff like that. Your second question was around disease progression and is there a difference between the adults and the kids. And I think that there's too much heterogeneity in the way PKAN presents and progresses to really make a clear distinction on that. I think that there is a great deal of difference between the rates of progression patient-to-patient. So I don't know that it's really known that there is a specific difference there, I think it's really case-by-case.

And I guess while we’re on the clinical program, moving on to DUPLEX. Just wanted to see if you can comment on the number of trial sites open for DUPLEX? And how much of an overlap is there between DUPLEX and DUET? And I guess, along those lines, how much an overlap do you anticipate once you begin your IgA nephropathy study?

We're not, at this point, giving specifics site numbers or patient numbers. But certainly, continuing to make progress and happy with the pace at which that's moving forward. We have a significant number of sites in DUPLEX that we’re enrollers in DUET. And it was very interesting at the investigator meeting to sit and talk with those folks, either the PIs or the study co-coordinators, because they are the ones that are dealing with the patients that are in the open label study. We're very happy with the compound. And really it's also their enthusiasm for DUPLEX. I don't know the specific breakdown on what the overlap is between DUET and DUPLEX, but we had a pretty significant rollover of sites that were in one and one into the other. The last part I think was how does that impact with the IgA nephropathy study? We do anticipate a significant number of sites that are in both. It's a competitive world out there for trial sites. And a lot of times it comes down to the capacity at the individual site, as much as it does for their enthusiasm for trials. If they've got the ability to do one or two studies, once they reach that limit no matter how much they like the next one, they can't sign up for that. So I hope I've answered your question.

And my last question is for Neil on the current commercial side. So I guess in terms of Thiola 2.0, if I can call it that. What's that's the remaining for the second half of '18 NDA filing? And I guess looking forward, just wanted to get your take-on who exactly would you deem a low hanging fruit? I guess if we go back to your Thiola commercial experience so far. Can you comment on the general discontinuation rates amongst commercial patients and how much of them do you expect to recapture with the launch of the 2.0?

So the first part of your question is that what was remaining to be able to file. We’re working with our partner right now in finalizing the relevant literature and cleaning up the parts of the file that need to be done to be able to pull the trigger. So that's all that's waiting for in that regard. And in regards to the new formulation and the patients that are out there, you pointed out correctly that there are a number of patients as whether it’d be through pill [indiscernible], whether it’d be through having to take the product on an empty stomach and other areas that we’ll discontinue product. We’re hopeful with that and areas that we've been working on and our new patient friendly formulation that we’ll be able to go back half to those patients who could still benefit from therapy and allow them to have exposure to a new patient probably formulation. It would be premature for me to tell you what those numbers look like and what we address in those patients. But we clearly feel that bringing the better experience for patients will allow us to be able to keep the patients that we have on therapy today, on therapy longer and readdress those patients who came off for one reason or another.

Thank you. Our next question comes from the line of Lisa Bayko of JMP Securities. Your line is now open.

Just a follow up on the PKU. Can you just talk a little bit more about your what your objective in the study, what we should be thinking about to say, this is really a drug and what would cautious amount of deal?

The reason to believe really on CNSA-001 is around bioavailability of sepiapterin as opposed to BH4. The bioavailability -- frank bioavailability is much higher with CNSA-001. But in addition to that, you have much higher tissue availability, which is relevant for PKU. There's also about 45 full greater ability to cross the blood brain barrier that compound relative to BH4, so that really forms the basis of the hypothesis that the standard of care leaves a lot of efficacy on the table with its current dosing paradigm and bioavailability. And if we can extend the amount of BH4 ultimately the same tissue that should translate to a much more robust clinical effect so the percentage of people that are actually fully improved or full responders with PKU should be a much larger number. And those that are in the partial responder category, which is the vast majority of patients that are currently treated, that that pool -- those patients should have a more robust response. Now to the heart of your question, what are we looking for? We should see very significant improvement in fee reduction with the CNSA compound over the standard-of-care. We’re not looking for an incremental increase for a very significant easily observed and quantified improvement and fee reduction in those patients with PKU.

And then to your commercial portfolio, can you maybe talk about any trends you’re seeing there with some of these compounds. And I know there has been some discussion amongst FDA about trying to look for opportunities for generics and loosening those restrictions, et cetera. Can you maybe talk about any impact of that on your business, if anything? Thank you.

We haven’t seen anything that directly impacts our business. There is obviously a great deal of discussion about particular options or opportunities to lower drug cost. I think it’s worth mentioning that we have not taken a price increase on any of our products in over three years. We can't guess what the government might be looking at, either currently or historically. But what we can say is that we feel our products are priced appropriately for the size populations they treat and for the degree of benefit which they convey. And we have not had anything happen that we see as having a direct on our ability to continue to grow those products.

And then just final question. Is everything still on track with the FORT study? It looks like you’re saying completion enrollment around year end. I know you’re saying second half before, so this is still in line with that but more towards the end. Is everything still on track there? And that’s it for me. Thank you very much.

I think we've been saying for a while that it takes by somewhere around the year-end, either late this year or early next year. We have seen a nice uptick in enrollment since the DSMB review. So we continue to believe it will wrap-up enrollment late this year or early next year and we’ll have data by second half of 2019.

Thank you. Our next question comes from the line of Tim Lugo of William Blair. Your line is now open.

I wanted to start with PKAN. I guess, can you give me a little context in terms of whether or not The Street is underestimating the size of the PKAN population, especially as you guys are identifying new patients at your sites and places, such as France. Any idea on -- if The Street is underestimating and by how much?

It's tough for me to know how much -- how accurate The Street’s estimates are, because I'm now really conversant in that. And I think that the true answer here is we don't know the true epidemiology or the incidents of prevalence. What we do know is when we did some high level patient mapping in the past, we found a certain number of patients in different regions. As we opened up the FORT study, and some of those study sites are in those regions, we're seeing patients and pockets of patients that we didn't see in the original mapping. And with rare disease it’s very common that when you open a trial, when there is therapies available, more patients are identified and that's not unexpected. What that actual number translates to, it’s early to call, but we are encouraged by the patient numbers that we’re seeing. But I don't think we're in a position to make estimates at this stage.

As we've gotten better visibility, we've just put a small group of medical science liaisons in Europe. We did some patient mapping in France previously. And when we get feet on the ground and people in those centers invariably, we were getting feedback that there are more patients and we knew about prior to getting that eyes on opportunities. So we can't really estimate how high it's going to go, but we do think we’ll continue to find new patients. And I also want to say thank you for your well wishes and probably worth mentioning that I am not going to disappear on retirement, intentionally continuing to work with the company and support my successor in any way I can in the future. So I'm going to be hanging around for a while just on a different capacity.

Are you planning on holding on to your Board seat in the long-term?

We currently have a plan for that to happen and we’ll see how that works out, but that is the plan.

And then I guess quickly on PKU. Can you give us some sense of how impressed you were with the Phase 1 data, and will you be sharing that at a medical conference or something similar later this year. And I guess, based on your comments, can we infer that at least in humans the drug is showing four to five times higher bioavailability compared to Cholbam. Any context you can share?

I don't know what the publication plan will be for CNSA-001 data in the near future. As you know, it's a partner program and that has to be negotiated the best needs of both organizations. And as for as how enthusiastic I am, I think we saw pretty much exactly what we wanted to see, which was increasing bioavailability which translated to a PK profiles that was predictable and miserable effects, and the amount of BH4 and plasma was significantly greater than what was seen in standard-of-care, mirrored what we saw on preclinical studies certainly from qualitative standpoint.

Can you share any details on the dosing frequency.

One study was a single dose study. The other was the one stealing multiple dose study. They were dosed for seven days.

And I’m showing no further questions at this time.

Great, thank you, Nicole. This concludes our call. Thank you all for joining us today, and we look forward to updating you on our progress in the near future.